Spreading the Good News

To reap the benefits of customer recommendations, companies were previously limited by physical factors, such as how many people the customer interacted with in a given day. Facebook, Twitter, Pinterest, and other social networks have changed that by giving brands the means to blast a customer's referral across the Internet in seconds.

"The ability to take a word-of-mouth action and amplify it has turned the word-of-mouth industry on its head," notes Matt Sunbulli, CEO and cofounder of Social Amp, a company (acquired by Merkle) that helps organizations create personalized experiences for customers and share them using apps built on Facebook's Open Graph. "Previously, it was hard to get scale and mass, but now you can do that."

Tricia Tangradi, director of marketing and support at HouseMaster Home Inspections, refers to social media as a "game changer" in her company's efforts to interact with current and prospective customers. "We know that people are using social media to seek referrals for numerous things, including home inspections, and so we have to be engaged in the social space," she maintains.

To drive more referrals using social media, the company implemented customer loyalty metric provider Satmetrix's NPS Go+ Net Promoter in the Cloud software. Using the Satmetrix NPS software, Tangradi and her colleagues created a customized program called HouseMaster CARES (Customer Acquisition & Referral Evaluation System).

Every time a home inspection is performed by a HouseMaster franchisee, Tangradi explains, customers receive an email asking them to fill out a three-question survey. The questions are: What was your experience with HouseMaster like? On a scale of 1 to 10, how likely would you be to refer us to your family and friends? What else would you like to say about your service experience at HouseMaster?

Based on the NPS scoring system, customers who rate the service as a 9 or 10 are identified as "promoters," and the software automatically gives them the option of providing feedback about their experience on Twitter, Facebook, and LinkedIn. The post includes a HouseMaster logo that links back to the company's Web site. HouseMaster employees are able to review the published posts on a dashboard.

Roughly 37 percent of HouseMaster's customers fill out the survey, and within the program's first six months, 10 percent of the survey respondents included a post on at least one of the social sites, according to Tangradi.

Many HouseMaster franchisees are "very excited about this program, and our goal is to keep pushing those numbers higher," Tangradi comments. "I could have wonderful advertising material," she adds. "But is there anything greater than a personal testimonial that says, "Here's the experience I had with this company, check them out for yourself?'"

Each franchisee also has the option of interacting with customers by thanking them for their referrals with a coupon or other offers. In addition, franchise owners are encouraged to maintain an active social media presence and build their reputation as experts by interacting with people and providing informative content about the real estate industry.

While she was unable to share the exact number of sales that can be tied to the online referrals, the effect of using social media is reflected in the revenue results, Tangradi says. "Our company's total revenue was up fifteen percent for the first seven months [of 2012] compared to the same period last year, but if you look at the twenty-four percent of franchisees who are actively using Facebook, including the referrals that we process, their revenue is up thirty-six percent over the same seven-month period. We know statistically that our franchisees' businesses can be double what those who are not using social media make, and we tell our franchisees that if they're not using social media, they're losing touch with their customers."

To Pay or Not to Pay

Although there are some consumers who are happy to tell others about a product or service without receiving something in return, it is common for companies to thank influencers and brand advocates for their enthusiasm with some type of remuneration. But while influencers, such as popular bloggers and celebrities, typically receive free samples and other perks from companies hoping to get a positive word about their brand, brand advocates should be approached differently, experts say.

"Advocates are not usually interested in receiving 'stuff,'" Christopher Carfi, social business director at PricewaterhouseCoopers, says. "What they tend to consider valuable is recognition or special treatment, such as advance access to upcoming releases, an opportunity to meet with the company's leaders at a VIP dinner, for example, or the chance to give input on new products. Items with an economic value, where a customer can say, 'I know exactly what this reward is worth,' can become complicated and should be at the bottom of the stack."

Paying consumers to recommend a product or service is simply "bad business," maintains Rob Fuggetta, CEO and founder of Zuberance, a social media marketing firm. "It's inauthentic, it's not necessary, and it will actually backfire on you," Fuggetta adds. "Research has shown that people are less likely to buy something if they find out the person who recommended it is getting something for themselves in exchange for that recommendation."

Fuggetta agrees with Carfi that showing your appreciation for a customer's recommendation by inviting him or her to a special event, sharing early product information, or providing some other form of intangible reward is acceptable.

"It's fine to say 'thank you' to advocates," Fuggetta notes, "but if you're running a program where someone gets a discount or something free in exchange for getting a friend to buy your product, you're now paying for that person to share content, which can become unsustainable."

On the other hand, it is becoming increasingly easy for consumers to be paid each time they recommend a brand using social media. In a blend of affiliate and referral marketing, new social media shopping sites like Beso and Referly make it possible for private citizens to turn their Facebook posts, tweets, and Pinterest images into a paid promotion.

Through an agreement with retailers, Beso, Referly, and similar sites let users select links to online items like handbags and clothing that they can post on their social network pages. Each user is assigned a unique publisher ID, and when friends click on the link, the referrer's account earns a commission.

Beso pays users an average of 14 cents for each click the company sends to participating retailers; other companies pay only when a purchase is associated with a link. Referly's commission rates range from 5 to 10 percent per sale.

As far as the Federal Trade Commission's rule that bloggers must disclose any compensation they receive for an endorsement, it is up to individual users to decide if they will disclose the fact that they are distributing paid promotions, according to Beso.

"As we understand it," Beso writes in its FAQ section, "the FTC guidelines are guidelines, and we are not aware of any actions taken against bloggers or content creators. That being said, there are best practices suggested by the FTC…. In short, if you post or share Beso Rewards links on Twitter, Facebook, etc., you can simply add a hashtag such as #ad, #paid, [or] #spon."

When deciding whether or not to offer customers an incentive to promote their wares, some organizations use a mixed approach. Doug Kennedy, senior marketing manager at Roku, a provider of digital media receivers for streaming television content, has developed a number of reward offers with social advocacy platform provider Extole.

After noticing that customers were recommending the company's products to other people, Roku introduced a referral program. "Without providing a channel, we had members already talking about Roku all over the Internet, and we wanted to reward people for sharing the gospel of Roku," Kennedy explains.